What are Leveraged & Inverse (L&I) ETFs

Leveraged ETFs are financial products that use financial derivatives and debt to amplify the returns of an underlying index. These ETFs aim to deliver multiples of the daily or monthly performance of the index they track. Common leverage ratios are 2:1 or 3:1, meaning the ETF aims to double or triple the daily performance of its benchmark index.

Inverse ETFs, commonly referred to as "bear ETFs" or "short ETFs," are a type of exchange-traded fund (ETF) designed to perform inversely to the index or benchmark they track. Essentially, an inverse ETF aims to generate positive returns when the market or a specific segment of the market declines in value.

Leveraged inverse ETFs (also known as “ultra short” funds) seek to achieve a return that is a multiple of the inverse of the underlying index’s daily performance. An inverse ETF that tracks a particular index, for example, seeks to deliver the inverse of the daily performance of that index, while a 2x (two times) leveraged inverse ETF seeks to deliver double the opposite of that index’s daily performance

Leveraged and inverse (L&I) ETFs typically are designed to achieve their stated performance objectives daily for a single day. Some investors might invest in these ETFs with the expectation that the ETFs may meet their stated daily performance objectives over the long period as well. Investors should be aware that performance of these ETFs over a period longer than one day can differ significantly from their stated daily performance objectives.

Note:

Investing in leveraged and inverse ETFs carries a high level of risk due to their complex nature and the potential for amplified losses. These products are best suited for experienced investors who are familiar with their mechanics and the inherent risks involved. Investors should carefully consider their risk tolerance and investment objectives before trading in leveraged and inverse ETFs.